UAE Cabinet approves federal budget for 2025

The UAE Cabinet has approved the Union General Budget Plan for next year, budgeting for AED 71.5bn in revenues and AED 71.5bn in expenditure. The Federal budget plan tends to aim for a balanced budget, and it accounts for a fairly small proportion of total spending given that the individual emirates have their own budgets, but it can be a useful pointer for government spending intentions. The budgeted spending for next year compares to the 2024 budget of AED 64.1bn announced last October, signaling an 11.5% rise. For the UAE’s overall budget balance, we forecast a surplus equivalent to 2.4% of GDP next year, following a projected 3.0% surplus in 2024.

New Zealand’s central bank cut its official cash rate by 50bps this morning, taking the benchmark rate to 4.75%. The move had been widely anticipated and followed the initial 25bps cut in this cycle implemented in August. Weakening employment and housing data in New Zealand explains the acceleration in monetary easing, a turnaround from the expectation earlier in the year that rate-cutting would not start until the second half of 2025.

China’s National Development and Reform Commission said yesterday that it was confident about hitting China’s economic growth targets (5.0%) this year as it held a briefing post the extended October holiday. The NDRC pledged to speed up spending, boost investment and increase support for those in need but the commentary was short on specifics around the stimulus being introduced and markets were disappointed that there was no sizeable increase in spending announced. Rather, CNY 100bn in spending originally budgeted for 2025 will be front-loaded into this year.

German industrial production data surprised to the upside in August as it expanded 2.9% m/m, beating the predicted 0.8% gain (though the July figure was revised to a 2.9% contraction, from 2.4% on the initial print. On an annual basis, production in August was 2.7% lower y/y. The production data was a rare bright spot in terms of German macroeconomic data, after factory orders contracted nearly 6.0% in August in data released the previous day.

Today’s Economic Data and Events

08.30 India RBI repurchase rate. Forecast: 6.50%

22:00 FOMC meeting minutes, September 18.

Fixed Income

• US treasuries rallied somewhat after the preceding four-day run of losses, with yields falling across the curve. The 2yr yield fell 4bps to 3.9582%, while the 10yr dropped by just 1bps and remained above the 4% level at 4.0119%.
• In the UK, 2yr gilts fell 3bps to 4.194%, while the 10yr dropped 2bps to 4.184%.

FX

• The dollar index gained for a sixth straight day yesterday, and continues to rise this morning, marking the longest run of gains since April 2022.
• Gains yesterday were minimal however, adding less than 1bps against its basket of peers. JPY closed almost flat at 148.20, while GBP climbed 0.2% to 1.3104, and EUR closed up just marginally at 1.0980.

Equities

• China’s post-holiday announcement disappointed markets and the initial surge in the Shanghai Composite on reopening had fallen to a 4.6% gain by the end of the day. That was still in contrast to the rest of Asia as the Hang Seng closed down 9.4% and the Nikkei 1.0%.
• That weakness continued in Europe, where the FTSE 100 closed down 1.4%, with the DAX and the CAC losing a lesser 0.2% and 0.7% respectively.
• In the US, markets picked up again yesterday after Monday’s losses. The Dow Jones added 0.3%, the S&P 500 1.0%, and the NASDAQ 1.5%.
• Locally, the DFM gained 0.8% and the ADX closed 1.2% higher. Saudi Arabia’s Tadawul added 1.0% while Egypt’s EGX 30 closed down 3.0%.

Commodities

• After climbing for five straight sessions on the back of Middle Eastern tensions, oil prices lost ground once more yesterday as the demand outlook came back to the fore after China’s reopening announcement failed to boost sentiment.
• Meanwhile, the API reported that US crude stocks rose by 11mn bbl last week. Brent futures closed down 4.6% at USD 77.2/b, while WTI also fell 4.6%, to USD 73.6/b.